Category Archives: Finance & Operations

FY14 marks the 30th year anniversary of the WTIA and, like the member companies we serve, we are committed to innovation and continuous improvement. We are excited to announce several big changes that are either currently in place or will be released during 2014:

Most Washington state technology businesses (> 70% of all tech employers) have chosen to align their fiscal year with the calendar year. This creates some nice administrative efficiencies and a sense of organizational urgency in an already very busy time of year.Â Many of you are immersed in budget and operating plan approvals, kicking off the performance review cycle, and making incentive compensation decisions. Â We want to discuss one additional critical business decision that is often addressed during this time of year: the purchase of health insurance for your employees.

The adoption of the Federal Patient Protection and Affordable Care Act (ACA) legislation is the most comprehensive reform of the U.S. medical system in recent memory. The ACA transforms the non-group insurance market in the United States, mandates that most residents have health insurance, significantly expands public insurance and subsidizes private insurance coverage, raises revenues from a variety of new taxes and reduces and reorganizes spending under the nationâs largest health insurance plan, Medicare.

Implementation of ACA is scheduled to unfold over the next few years and involves all the major health care stakeholders, including the federal and state governments, as well as employers, insurers and health care providers.

ACA makes numerous changes in the way health care is financed, organized and delivered. Among its many new provisions, it requires state-based insurance exchanges to be established by 2014. These state-based exchanges are electronic/web-based platforms that provide individuals with the ability to purchase insurance, regardless of existing health conditions or financial situation. This is achieved through federal subsidies providing that certain conditions are met.

The primary goal of ACA is to increase access to affordable health insurance for the millions of Americans without coverage and to make health insurance more affordable for those already covered. As such, ACA is projected to have a significant impact on federal spending and revenues as the government will, in effect, subsidize and/or give insurance to our under-served/poor populations. The increased costs of expanding public and private health insurance are expected to be offset by revenues from new taxes as well as fees and costs savings associated with delivery system reforms.

The Expected Losers

Companies â In order to offset the increased costs of ACA, employers will incur both new taxes and fees in conjunction with procuring health insurance for their employees. Additionally, several of the new ACA provisions change the existing laws and mandate that employers offer health insurance. The financial impact of ACA has been greatly debated; however, it is widely accepted that companies will incur significant increases in the cost of health care and the administrative time they spend in complying with the laws.

Employees in âTargetedâ Industries â ACA has levied more stringent requirements for employers to offer health insurance and includes penalties in situations where basic standards have not been met. This is particularly relevant to industries that lend themselves to part-time or seasonal work like restaurants, agriculture, tourism, etc. The goal was to provide the employees within these industries access to affordable health insurance, which they typically did not receive in the old paradigm. The theory is fine, the law is not. ACA set minimum working requirements (hours per week, period of service) for those employees to be eligible for benefits. As a response to this, employers (rather than paying for insurance or the penalties) have and will modify the working hours and service periods of their employees so they are not subject to the requirements of ACA. This will result in less work and lower earning power for these employees.

Impact of ACA on Tech Companies and Professionals

Changes in Buying Patterns Related to ACA â One of the core principles of ACA is âaffordabilityâ and the notion that millions of Americans canât get needed health care because of their financial situation. This basic principle, in most situations, is not relevant to tech companies and professionals because of the high wages paid and underlying economic strength of the industry. In fact, the tech industry not only pays the highest wages of any industry in Washington, the demand for full-time, highly compensated workers, far exceeds the supply. The underlying economics, therefore, do not suggest that employers will modify work hours/service periods to avoid ACA because throughput and staffing are core challenges.

Tech Industry will Subsidize ACA â Because of the economic strength of the tech industry and the fight to recruit and retain the best talent available, it is expected that tech companies will continue to offer comprehensive and competitive health benefits to their employees. This results in higher premiums, on average, than other industries. Further, unlike seasonal and retail businesses, tech companies have minimal motivation to manipulate headcount to avoid taxes/penalties because of the labor supply and throughput issues. Â Lastly, the rapidly-growing tech industry, and its highly paid professionals, will be funding ACA shortfalls through tax revenues associated with increased headcount.

WTIA Health Trust is a SPECTACULAR Solution

The WTIA Health Trust (âTrustâ) offers the most comprehensive plans at the best prices for tech companies, which will help offset the fees and penalties associated with the ACA.

It has been recognized as a bona fide group Association Health Plan (AHP), which assures that it will continue to serve its eligible members beyond 2014 implementation of ACA. The bona fide status of the WTIA allows tech companies to be evaluated as a âgroupâ. The group status allows the carriers to consider more factors in the risk assessment process which has a direct pricing impact.

The related pricing primacy and discounts offered to WTIA members under the WTIA group plan are significant and save, even very small tech companies, thousands of dollars per year. Most importantly, the WTIA Health Trust includes access to other WTIA services and programs. The WTIA is the only health insurance solution in the marketplace that provides employees with access to a vibrant and active tech community.

Interested in learning more?

If you have questions related to ACA legislation, health insurance, and other needed business services, the WTIA can help. Please contact the following WTIA representatives with further inquiries:

The top five most frequent discussion topics I have with developers and software engineers include:

Game of Thrones

Star Wars vs. Star Trek

Computers destroying humans and taking over the world

APIs

Executive leadershipâs limited understanding of technology

I have pretty thick skin and love bantering about science fiction and fantasy, but when it comes to heated dialogue around leadershipâs fundamental lack of technology understanding, I get a little sensitive. Usually I am outnumbered in these debates and I am definitely at a disadvantage in terms of technology training and background. With that said, as the discussion becomes more intense, I always revert back to my training as a finance professional and ask the central business question:

How does the technology make or save the company money?Â

APIs Save MoneyÂ

In my experience, when the topic of APIs come up it typically becomes a very technical discussion between developers. Clearly this makes sense as APIs are core to the design and development process and significantly impact workflow and efficiency. This is one of the main reasons that executive leadership in technology companies should make a more concerted effort to understand API infrastructure. Improving workflow and efficiency saves companies money!

Labor (salaries, benefits, etc.) is the most significant cost that any company will incur and that is especially true in the technology industry.Â A companyâs ability to maximize their workforceâs efficiency and throughput is a major success driver. This is where the API discussion becomes extremely relevant to leadership. If the interface of the underlying data used to create the product or service is inefficient or poorly designed, this has a massive cost impact on the business. Clean, well-structured and clear API architecture allows the most important resource (developer labor) to be deployed more effectively.

APIs Make Money

Understanding your customer is a cornerstone of running a successful business. In the post internet era, there has been exponential improvement in the ability to understand customer buying habits, motivations, demographic and other psychographic information.Â API and related design and interface technology is at the root of this.

The availability of specific customer data through the use of, for example, micro service API techniques, is driving revenue growth by aligning specific offerings against customer behavior patterns. By breaking a task or procedure down into smaller components, the underlying API infrastructure can provide cleaner, more flexible, and more specific data about users. The presence of very specific and focused consumer information greatly assists marketing, sales, and development functions in assessing marketplace trends and quickly responding to marketplace opportunities.

ConclusionÂ

Continual learning, innovation, and personal development are some of the greatest benefits (and challenges) of being associated with technology.Â Leadership and business professionals running technology companies must be in-synch with the major driver of organizational success: its developer workforce. This must include a fundamental understanding of the major challenges, issues, and activities developers engage in as part of their job.

I absolutely look forward to interacting with the core engineers and developers in the WTIA community.Â Even if 90% of it goes over my head, their insight and feedback is critical to my own development and effectiveness as a business professional in the technology industry!

I have always had an appreciation for data and its power to inform decisions and drive positive outcomes.

The first career path that I pursued out of college was public accounting at a âBig Fourâ firm. As an auditor I was given specific training in collecting, gathering, and analyzing data to evaluate the effectiveness of internal accounting and financial planning and analysis functions. In most of my auditing experiences I found the client staff to be competent with their analysis and conclusions, yet they often failed to persuade executive leadership to make business decisions that were clearly supported by the underlying data.

As I started to reflect on why these challenges were so pervasive, I observed that the presentation, layout and user interface of the data left a lot to be desired.Â I concluded that if I could improve my data presentation and communication skills it would dramatically increase my value as a professional.

Edward Tufte â My Visualization Role Model

A friend recommended that if I was interested in learning more about the power of well-presented data I should read works of Edward Tufte, a renowned American data visualization expert and professor of computer science and statistics at Yale University. Â Tufte and his analysis of a notorious cholera outbreak changed my life and forever placed me on the path of âpracticing visualization.â

In his short work Visual and Statistical Thinking: Displays of Evidence for Making Decisions, Tufte dissects how Dr. John Snow solved a major health epidemic that took the lives of over 600 London residents in 1854. Dr. Snow used unique data aggregation methods and a heat-mapping layout to illustrate the correlation of cholera outbreaks to well pumps in the city. Through his analysis he discovered exactly which well pump caused the epidemic, and most importantly, prevented further spread of the infection by having the Parish Council remove the handle of that pump.

Tufte then compared this data visualization example against the NASA Space Shuttle Challenger disaster that occurred in January of 1986. The data scientists were aware of the risks that Challenger faced and recommended delaying the mission based on their quantitative analysis and historical stress tests of O-rings. Unfortunately, they were ineffective in the way they presented and communicated the information and as a result were not able to prevent the catastrophe that took place. Tufte goes on to provide examples and recommendations for how the data could have been laid out to more clearly communicate the risks associated with a launch in cold temperatures.

Best practices

Based on Tufteâs phenomenal juxtaposition of real life data successes and failures, I applied my own professional experience to come up with four best practices to improve data visualization and communication skills:

1)Â Â Â Â Identify the âcustomerâ â Who is consuming the data? Is it your boss, a head executive with deep financial experience, a relatively new person to the workforce with limited subject matter knowledge, or a decision maker that has already made up their mind about what they are going to do? Each of one these âcustomer profilesâ could potentially dictate a different visualization strategy. Know your audience and conform your data presentation strategy to meet their needs.

2)Â Â Â Â Keep it Simple Stupid (KISS) â Although it is not the friendliest acronym, it is one that finance and operation professionals should commit to memory. Simplifying the layout allows the user to better focus on the core message of the data. Â In contrast, complex presentation is difficult on the eye and forces the user to draw conclusions on what data is the most relevant.

For any financial model or analysis I prepare, I always include an executive summary and keep the summary to one page. An executive should be able to make informed business decisions from data. Â An analyst should be able to aggregate their findings and communicate their conclusions in a succinct fashion.

3)Â Â Â Â Be aware of visual design â Visual design should be as important to the finance function as it is to the marketing department. Â In an effort to hone the message and highlight the data findings, the presentation and layout of the document is critical.Â Be thoughtful about color, grids, chart types, and graphs. All of these elements impact the ultimate display of the information and will either better focus the user or will make the message more convoluted.

4)Â Â Â Â Seek feedback from representative customer profile â I highly recommend peer or âlowest common dominatorâ data reviews prior to release.Â If a person with limited background that is unfamiliar with the data can quickly come up with the message/conclusion from review of the analysis, then you know you are on the right track. Conversely, if the reviewer gets confused, overwhelmed or has the wrong takeaway, you will likely have to rethink your work.

Conclusion

Data visualization is important for all business functions.Â Thankfully, we are blessed with great tech companies in our local ecosystem that offer fantastic visualization products and services. Member companies like Tableau Software, Simply Measured, and Moz are leaders in this space and provide great tools for technology and business professionals.Â Implementing best practices and investing in visualization resources can go a long way in taking your data analysis from good to great!